Fri Dec 27 2019 17:00:00 GMT+0000 (Coordinated Universal Time)
Michigan’s recreational marijuana industry poised to grow exponentially in 2020
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LANSING, MI -- Marijuana, a plant derided by government and much of society for the better part of the last century, received a hearty welcome-back from Michigan in 2019.
When marijuana prohibition in Michigan ended and the doors to first few licensed recreational marijuana shops in Ann Arbor opened to customers on Dec. 1, some lines stretched nearly a quarter-mile.
Demand for legal, licensed, store-bought marijuana has been brimming in the shadows of the black market for years, Marijuana Regulatory Agency Director Andrew Brisbo in late December told a room of entrepreneurs, lawyers, accountants, real estate agents and other professionals eager for a seat in the fledgling industry.
“We wanted to rip the Band-Aid off and allow it to start forward in a controlled environment," Brisbo said when asked about his decision to accelerate the launch of recreational marijuana sales by about four months.
Recreational marijuana is an industry that until this month didn’t exist. In the first two weeks of December, the state Marijuana Regulatory Agency said a handful of newly licensed retail shops logged more than $3 million in sales. By September 2020, budget officials project nearly $390 million in recreational marijuana sales.
And the ceiling is a long way up. By the end of 2021, recreational marijuana is expected to explode to a nearly $1.5 billion industry for the state.
As of Dec. 23, 2019, the state has issued 42 recreational marijuana businesses licenses, including 21 retail licenses, 11 growing licenses to four businesses, 4 processor licenses, a license for testing labs, two event organizing licenses and three to secure transportation companies.
“The (Marijuana Regulatory Agency) has been extremely efficient in all areas of service and continues to meet our statutory obligations ahead of schedule,” spokesman David Harns said. "We are close to implementing a consolidated administrative rules package that will continue to provide a clear, consistent framework for licensees.
“We will continue our approach of collaborating with stakeholders and discharging our duties in a transparent and efficient manner, to the benefit of the industry and Michigan citizens.”
A LOOK BACK
It all began Nov. 6, 2018 when 56% of Michigan voters, 2.4 million people, checked “yes” in the box next to a ballot proposal that would legalize marijuana. The new law allowed anyone over the age of 21 to grow up to 12 marijuana plants in their homes and possess or transport up to 2.5 ounces of marijuana flower, including up to 15 grams of marijuana in concentrate form.
It also mandated that the state government, by Dec. 6, 2019 -- a deadline the state beat by a month -- create a licensing program for commercial marijuana and supporting businesses. The law includes a 10% excise tax and 6% sales tax onto sales, the proceeds of which will benefit the counties, cities, villages and townships that participate, as well as Michigan road, infrastructure and schools funds and research for the medicinal use of marijuana.
While the law allowed private use of marijuana, and required creation of the framework for a new industry, it didn’t force the state’s 1,773 cities, villages or townships to participate in the commercial side of things. And as of the new year, 80 percent, nearly 1,400 of them, have chosen not to participate.
Brisbo said while he expected many communities to opt out, he was “unpleasantly surprised” by how many said no, including communities that already allow medical marijuana business.
The new law came to Lansing accompanied by newly elected Gov. Gretchen Whitmer, who by March abolished the heavily criticized Medical Medical Marihuana Licensing Board, which came into being under ex-Gov. Rick Snyder, and replaced it with the Marijuana Regulatory Agency.
With $10 million in funding -- that is to be repaid to the General Fund with licensing and applications fee proceeds -- the agency grew to more than 120 employees who administer medical and recreational marijuana licenses throughout the state.
The Marijuana Regulatory Agency, on July 3, issued the first emergency rules for recreational marijuana. The state gave municipalities four months to establish their own zoning and ordinances for recreational marijuana business.
While the vast majority of cities, villages and townships banned recreational business, Brisbo thinks many will reverse allow it at some point.
“I think a lot of them are waiting to see how things come online, but in general, this is still a very politically divisive topic,” Brisbo said.
The state began accepting application for recreational licenses on Nov. 1.
Detroit is among the problematic communities where a ban wasn’t in place at the time the state opened up the application process. Numerous hopeful businesses submitted applications during the window that remained open through Nov. 12, at which time Detroit City Council passed a temporary ban on recreational marijuana businesses.
The ban is set to expire at the end of January, at which time Detroit could decide to allow recreational business or extend a ban. In the meantime, the state faces the conundrum of whether to process and issue licenses.
When asked how the state plans to handle the situation during a ticketed event on Dec. 18, Brisbo provided a vague answer.
“If there’s not a prohibitive ordinance in place at the time of application, that would not be a basis for denial,” he told Stuart Carter, who owns Utopia Gardens, a Detroit medical dispensary seeking a retail license. “But we have to look at all the other criteria, as well.”
While the state announced its intent to issue the first recreational licenses by December, Brisbo said in early November it would likely be months before the first sales.
In a surprise move, the Marijuana Regulatory Agency on Nov. 13 announced a change that would expedite things. It would allow existing medically licensed businesses that obtain recreational licenses to transfer up to half their 30-day-old medical marijuana and products to the recreational side for sale on Dec. 1.
This move pleased many, including thousands of customers who eagerly lined up to buy recreational marijuana Dec. 1, but not everyone.
“We have such a shortage of product right now - our state is already at risk of running out of cannabis completely due to the early rec sales," Michigan Cannabis Industry Association Executive Director Robin Schneider said during on WKAR’s Off the Record in December. “We might be sending patients back to the illicit market before this is over.”
Brisbo admitted there was an existing shortage of certain strains of marijuana flower prior to the commencing of recreational sales, but he said there were also a lot of other products lingering on shelves that new customers were itching to buy.
“When we look at supply and demand, there was always going to be a lack of supply where demand just increased 10 times because of passage in law,” Brisbo said. " So we were going to have to overcome the struggles, whether it’s an hour, two months, six months, eight months, it’s going to happen."
Following the opening of recreational sales, some shops ran out of flower on a daily basis. Others imposed purchase limits to ensure they had enough product for everyone.
THE VAPING SCARE
While the transition to recreational marijuana took place, the public was reminded of one of a benefit of the regulated industry -- greater product safety.
Since March, people began mysteriously dying after being hospitalized for lung-related injuries later linked to an ingredient added to vaping distillate THC marijuana products.
As of Dec. 17, Centers for Disease Control had recorded 52 deaths, including two in Michigan, and 2,506 hospitalizations nationwide related to the vaping crisis.
While not conclusive, health investigators identified vitamin E acetate as a likely contributor to the outbreak.
Vaping manufacturers were using vitamin E acetate as a cutting agent to dilute and thereby increase the volume of their product for greater profit.
Vitamin E acetate, which can be purchased legally online, is safely consumed in food and applied to the skin in cosmetic products, but “may interfere with normal lung functioning” when inhaled by way of vaping, the CDC said.
Federal and state health officials, as well as Michigan’s most active licensed marijuana testing lab, PSI Labs in Ann Arbor, said the vitamin E acetate-contaminated products were being found in only black market products.
That changed after the Marijuana Regulatory Agency on Nov. 22 issued a temporary ban on all existing vaping products until they had been tested for vitamin E acetate. While sampling stock, PSI Labs found some batches of product containing high levels of vitamin E acetate. This led Michigan to recall for destruction nearly 65,000 vaping cartridges, including 5,000 that had already been sold.
State regulators say current rules ensure new vaping products don’t contain the banned ingredient. The contaminated product entered the market early last year, prior to the new rules being in place.
The recreational marijuana market is sure to experience astounding growth in the coming year as retailers, transporters, grow operations, laboratories, event planners and other businesses ramp up.
There are however limitations on how large the industry can grow under the current participation levels.
Most participating municipalities capped the number of businesses they’ll allow. Marijuana Regulatory Agency Director Brisbo said the industry is already reaching a “saturation point” of allotted businesses in some of those communities.
In the meantime, recreational marijuana is changing the culture and face of Michigan. Morenci, a city of 2,200 along the Ohio border, embraced medical marijuana two years ago and became one of the first outside Ann Arbor to have an operational recreational marijuana shop in December.
A 70-acre plot of industrial-zoned land on the outskirts of the quiet farm town is now booming with marijuana business, growers, processors and a handful of medical and recreational dispensaries.
A freshly paved road that marijuana built winds through a series of enormous 20,000-square-foot warehouses and the shuttered bank, roller rink and ice cream shops on the main strip now sell marijuana.
Less than a few years ago, no one wanted the city-owned land that was being offered to developers essentially for free. Now the plots and new businesses perched atop them are worth millions. People are slowly moving to town for job opportunities and workers are bellying up to the nearby bars following their shifts or during lunch breaks.
“The recreational industry, once fully implemented, will have a significant impact on Michigan’s economy, with hundreds of millions of dollars in tax revenue flowing into state and local governments,” Schnieder of the Michigan Cannabis Industry Association told MLive last month. "We’ve already begun to see waves of hiring by cannabis businesses looking to fill these good-paying jobs, which will have a major impact on communities as these workers have money to spend on goods and services at their local small businesses.
" ... As the opt-out communities see that the sky isn’t falling in the communities that have opted in, we’ll begin to see other city councils choose to opt-in."
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